U.S. pharmaceutical company AbbVie Inc. canceled plans for the $55 billion purchase of Irish company Shire PLC Monday, a deal that would have been the largest U.S. tax inversion. AbbVie said it would still pay Shire $1.64 billion as compensation for calling off the deal.
AbbVie, a Chicago company that manufactures arthritis drug Humira, backed out of its purchase of Shire as a result of stricter U.S. tax rules released last month that diminished some of the financial benefits of tax inversion schemes. The new rules “fundamentally changed the implied value of Shire to AbbVie in a significant manner,” AbbVie said in a statement earlier this month.
Under the original deal signed in July, AbbVie would have purchased Shire and moved its headquarters to Ireland, where its corporate tax rate would have effectively fallen to 13 percent, down from 22 percent in the United States, according to the Wall Street Journal.
Richard A. Gonzalez, AbbVie chairman and chief executive officer, criticized the tax rule changes in AbbVie’s announcement of the deal’s termination Monday. “The U.S. tax code is outdated and is putting global U.S.-based companies at a disadvantage to foreign competitors in an area of critical importance, specifically investing in the United States,” Gonzalez said. “Comprehensive tax reform is essential to create competitiveness and to stimulate investment in the economy.”